1For institutional investor use only. Not for use with or distribution to the public.
If you are a fiduciary, as defined by the Employee Retirement Income
Security Act of 1974, as amended (ERISA), you are responsible for the
administration and compliance of your organization’s retirement plan. If
you better understand your role and responsibilities under ERISA, you
can properly administer your plan.
Even if your plan is not subject to ERISA, there
may be advantages to following certain ERISA
requirements. For example, ERISA generally
requires a plan fiduciary to oer a plan with a
diversified menu of investment options. Non-
ERISA plans generally follow this practice as well.
Before implementing any quasi-ERISA standards
for a non-ERISA plan, please consult your legal
counsel to ensure that it is consistent with the
requirements for your plan.
If you are an ERISA plan fiduciary or if you are a
non-ERISA plan sponsor that chooses to follow
certain ERISA requirements, you might consider
implementing processes and procedures to make
prudent decisions in the best interest of your plan
participants and their beneficiaries, including, but
not limited to, monitoring plan investments and
service providers properly. If you are a public or
government plan sponsor, it is important that you
familiarize yourself with any state law requirements
that might be applicable to your plan.
FIDUCIARY SERIES
What it means to be an
ERISA plan fiduciary
Who is a plan fiduciary?
An ERISA fiduciary is somebody who is either formally designated
under the terms of an ERISA plan as a “named fiduciary” or is a
fiduciary based on their roles and responsibilities. ERISA, together
with the Internal Revenue Code (IRC), provides the guidance for
private workplace retirement plans. Note that while all plan sponsors
must comply with the IRC, not all plan sponsors are subject to ERISA.
Note that public institutions (e.g., public education), governmental
employers and churches are examples of types of plan sponsors that
are exempt. For plans that are subject to ERISA, a person or entity is
considered an ERISA plan fiduciary if they:
o Exercise any discretionary authority or control over
management of the plan and/or the plan assets
o Provide investment advice for a fee or other compensation
(direct or indirect) with respect to any assets of a plan, or
have any authority or responsibility to do so
o Have any discretionary authority or responsibility in the
administration of the plan
What if I’m a non-ERISA
plan sponsor?
2For institutional investor use only. Not for use with or distribution to the public.
What it means to be an ERISA plan fiduciary.
What does it entail?
If you’re an ERISA plan fiduciary, it’s important to familiarize yourself
with the responsibilities that come with that role. You should consider
these five key things:
1. “Exclusive benefit” rule:
A fiduciary must carry out its fiduciary
obligations solely in the interests of plan participants and beneficiaries
with the exclusive purpose of providing benefits to them and
defraying reasonable expenses of administering the plan.
o No self-dealing: Self-dealing (taking advantage of a position in
a transaction and acting for personal interest) is strictly
prohibited.
1. Diversification of plan investments: Fiduciaries must diversify
plan investments to help minimize the risk of loss. Whether the
diversification requirement is met is based on the relevant facts and
circumstances for the plan. (Note: Diversification is a technique to
help reduce risk. There is no guarantee that diversification will protect
against income loss.)
2. Compliance with plan documents: Fiduciaries for an ERISA plan
must implement and operate a plan document that complies with
ERISA as well as the IRC. A plan that is not subject to ERISA must
comply with the written plan requirements for such plans under the
IRC, as well as any applicable state requirements.
3. “Prudent person” standard: A fiduciary is obligated to act with the
care, skill, judgment and diligence that a prudent person in a similar
capacity would use under like circumstances. An important aspect of
this is the “procedural prudence test” in which a fiduciary’s prudence
is judged by the process used in reaching a decision, not judged
necessarily on the outcome of the decision.
4. Selection of service providers and the duty to monitor: Fiduciaries
must exercise prudence in the selection of service providers and
continue to monitor the providers selected. That means, for example,
that a fiduciary’s responsibility does not end with the proper selection
of an investment option. A fiduciary must continue to monitor that
investment option to ensure that it remains appropriate for the plan.
Be aware. Understand your responsibilities. (Refer
to Page 3, 10 things to avoid.)
Follow a process. Consider establishing a plan
governance process and procedures that identify
and define all fiduciary roles and protocols.
Maintain files that document your processes to
demonstrate your due diligence.
Maintain compliance. Review your plan document
to be sure it accurately reflects the operation of your
plan, together with the investment options oered
and any associated limitations therein, as well as
ensuring that it is regularly updated for applicable
legislative and regulatory requirements.
Align investments and objectives. Consider an
investment policy statement (IPS) that aligns with
the plan’s objectives and includes an investment
approach that sees participants to and through
retirement. Consult with your legal counsel to
determine if an IPS is appropriate for your plan.
Monitor. Review your monitoring processes to
determine whether participant transactions (such
as contributions) meet their respective limits and
timing requirements. Also review how investments
are performing against established benchmarks.
Communicate with employees regularly.
Implement processes and procedures for notifying
employees about plan information, including any
required notices for eligibility, enrollment deadlines,
contribution limits, Qualified Default Investment
Alternatives (QDIAs) and ERISA-required fee
disclosures.
Review annually. Complete at least annually
(and more frequently if circumstances warrant it).
Perform plan and investment reviews on your own
and/or with the help of a qualified advisor. Consider
a review of your reporting to clarify how your plan
is working and to identify areas for improvement.
Simplify. It might be prudent to look for ways
to simplify and control costs, and ease the
administrative burden on your sta where possible.
Follow your procedures
Here are some common practices
intended to help you with meeting
your ERISA fiduciary responsibilities.
For institutional investor use only. Not for use with or distribution to the public.
What it means to be an ERISA plan fiduciary.
Protect yourself and the plan
Documentation is key to protecting your interests as well as the
interests of the plan and your participants. It goes beyond just
identifying plan fiduciaries. It is prudent to maintain your plan
documentation —including, but not limited to, detailed notes from
meetings that address fiduciary responsibilities as well as any minutes
and materials approved by each fiduciary. Plan fiduciaries should
acknowledge and understand their roles, and should take part in
initial and ongoing fiduciary training. It’s important not to overlook
the importance of this training, as it has been raised in the course of
Department of Labor retirement plan investigations. In the current
regulatory environment, detailed and comprehensive documentation
can be invaluable.
1. Failure to follow plan documents
2. Imprudent selection of plan investment
alternatives
3. Failure to properly monitor available plan
investments
4. Improper selection of ERISA plan fiduciaries
5. Inappropriate delegation of fiduciary functions
6. Failure to provide timely and/or adequate
required disclosures to plan participants
7. Reliance on an “expert” without documenting
why certain decisions were made
8. Confusion surrounding fidelity bonds and
fiduciary liability insurance for ERISA plans
9. Failure to understand and follow restrictions in
plan funding vehicles
10. Failure to provide required disclosures to plan
participants and beneficiaries
For more information about your ERISA
plan fiduciary responsibilities, work with
your legal counsel, tax advisor and/or
plan provider. You can also learn more
from the Department of Labor.
Being aware of potential pitfalls can help you
avoid problems and meet your ERISA fiduciary
obligations.
This material is for informational or educational purposes only and does not constitute investment advice under ERISA. This material does not take
into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions
should be made based on the investor’s own objectives and circumstances.
The TIAA group of companies does not provide legal or tax advice. Please consult your legal or tax advisor.
Please note this material is for informational purposes only and the statements made represent TIAA’s interpretation of applicable law. It is presented
with the understanding that TIAA (or its ailiates, distributors, employees, representatives and/or insurance agents) cannot and does not provide legal
and/or tax advice. Make sure we are including the most recent and appropriate disclaimers.
Investment, insurance, and annuity products are not FDIC insured, are not bank guaranteed, are not bank deposits, are not insured by any federal
government agency, are not a condition to any banking service or activity, and may lose value.
TIAA-CREF Individual & Institutional Services, LLC, member FINRA, distributes securities products. Annuity contracts and certificates are issued by
Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible
for its own financial condition and contractual obligations.
©2023 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, 730 Third Ave., New York, NY 10017
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10 things to avoid
